Smallholders urged to apply for replanting grants

KUALA LUMPUR: Plantation Industries and Commodities Minister Datuk Amar Douglas Uggah Embas urged smallholders to apply for replanting grants to replace ageing oil palms with higher yielding seedlings.

Last Friday, Prime Minister Datuk Seri Najib Razak, in his 2015 Budget speech, announced that RM41 million had been allocated for smallholders to embark on new plantings and replanting of their unproductive rubber and oil palm trees.

Smallholders are those who own 40ha or less. 

When asked on the portion for the replanting of oil palms, Uggah said the allocation worked out to RM7,000 per hectare for oil palm land in Peninsular Malaysia and RM9,000 a hectare in Sabah and Sarawak. 

This subsidy is meant to raise the annual national oil yield, which has been stagnating at below four tonnes a hectare over the last two decades.

It is hoped that by 2020, the annual fresh fruit bunch yield would improve to 26.2 tonnes a hectare from 21 tonnes currently. 

In response, Malaysian Palm Oil Association chairman Roy Lim Kiam Chye urged the government to extend and top up replanting grants for all oil palm planters and not just the smallholders.

“Incentives to accelerate replanting at current low prices will ensure future competitiveness of the industry. The replanting grant is good for the smallholders but what about estate owners? They need to replant, too,” he added.

Last Friday, the government also took a pre-emptive measure to extend the crude palm oil (CPO) export duty exemption until December.

“Although it is a good gesture from the government, it is common knowledge that at current price levels, CPO export duty is already zero. With the current global edible oils supply situation, prices are not likely to rise significantly to trigger the duty factor,” he said. 

Lim added that the exemption had levelled the playing field for Peninsular Malaysia exporters against those in Sabah and Sarawak. “If we look deeper, zero export duty has somewhat dented the advantage of producers in Sabah and Sarawak as they no longer enjoy the 30 per cent discount on duty.”

Maybank Investment Bank senior analyst Ong Chee Ting concurred with MPOA, saying Malaysia’s palm oil exports can be freely exported during these high production months until the end of the year. “It aims to quickly flush out incoming supplies to help a more sustained CPO price recovery next year.”

On price forecast, Ong said CPO had lost its price competitiveness due to the recent slump in crude oil price and narrowed price discount to competing soyabean oil.

CPO price, therefore, needed to trade lower at RM2,000 per tonne to stimulate demand and flush out incoming supplies during these peak production months, Ong said.

“We think CPO prices will be under near-term price pressure to stimulate demand. We expect CPO prices to continue trading sideways at between RM1,900 and RM2,200 per tonne until early December. Hopefully, it closes the year above RM2,400 per tonne,” he added.